LIVE: Greece votes 'No' to EU debt proposals, meaning Euro exit+default highly likely

[-:Undertaker:-]

http://www.itv.com/news/update/2015-07-05/greece-must-introduce-new-currency-if-no-vote-wins/
http://www.telegraph.co.uk/finance/economics/11718775/Greece-euro-referendum-day-results-live.html

Greek Referendum Day results live: Greek voters reject EU and IMF debt proposals meaning a default and exit from the Eurozone are now highly likely

'No' vote much higher than opinion polls initially predicted with a twenty percent margin.


http://www.ezimba.com/work/150706C/ezimba18460663198000.png



Its government has left it for the people to decide whether to accept an austerity package put forward by international lenders in return for a further bailout from the eurozone rescue fund.

Greece will have to introduce another currency if the "no" vote wins in today's referendum on an aid-for-reforms deal, the head of the European Parliament, Martin Schulz, has told German radio.



https://www.youtube.com/watch?v=2zDjy9S4RQ4



"Is Greece still in the euro after this referendum? That is certainly the case, but if they say 'no' they will have to introduce another currency after the referendum because the euro is not available as a means of payment," Schulz told Deutschlandfunk radio.

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"The moment someone introduces a new currency, they exit the euro zone. Those are the elements that give me some hope that the people will not vote 'no' today."

His comments are some of the clearest made by a top EU official.

It looks like the Greeks have gone and done it.

The Eurocrats are terrified of a Greek exit because if Greece exits and recovers, we'll see a domino effect in Europe.

Thoughts?

[-:Undertaker:-]

40.17% of votes counted in Greek referendum.

NO 1,228,858 (61.08%)

YES 783,184 (38.92%)

[Firehorse]

Going to be a great time to invest in Greece very soon.

[-:Undertaker:-]

It's a done deal. Greece has voted 'No' to the EU.

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From what I read, it's all in the hands of the unelected and unaccountable-to-anyone ECB now.

[FlyingJesus]

What's their alternative plan for making coins

[-:Undertaker:-]

What's their alternative plan for making coins

That'll be secret and sudden to avoid speculation. I would be amazed though if the currency hasn't already been printed and is waiting.

The likelyhood is that Greeks will wake up, find out all banks/transactions have been closed and the Drachma reintroduced. Followed by devaluation once floated.

[FlyingJesus]

Oh I meant actually recovering financially not minting :P

[-:Undertaker:-]

Oh I meant actually recovering financially not minting :P

Oh, well defaulting will clear much of the debt and de facto devaluing (by leaving the Euro) will help exports. Imports on the other hand will become more expensive. That in itself is a huge restructuring of the economy that will take a few years to begin to work, as well as the structural reforms Greece needs to implement which probably only a right wing government will actually carry out such as highering the pensions age, cutting back subsidies etc. It's going to sting initially and depends on future Greek governments but ultimately they'll have their own future back in their own hands. That's the principle here.

The bigger question here is, once Greece leaves the Euro and begins to recover via exports, what will Spain/Italy/Portugal all do? It's the EU's worst nightmare.

[FlyingJesus]

So they basically just pretend they don't owe any money and try again maybe I should have a country

[-:Undertaker:-]

So they basically just pretend they don't owe any money and try again maybe I should have a country

Basically. But a default doesn't mean you can simply carry on as before as you'll then be frozen out of international gilt/bond markets making lending at normal prices very hard for a long time - as nobody would likely trust you for a long time to repay your debts again if you kept defaulting. Being unable to lend at normal rates for a long time consequently means you're then forced to live within your limits and have to undergo brutal economic restructuring.

Greece ideally needs default, exit from the Eurozone and some kind of right-wing military government (https://en.wikipedia.org/wiki/1973_Chilean_coup_d%27%C3%A9tat) or Margaret Thatcher-type figure to reform state finances.

[GommeInc]

The only real option I can see working is that Greek pulls out of the Eurozone, reinstates their own currency (Drachma), devalue it heavily in the hopes of making it cheap to invest and import/export, and grow that way. Maybe in the future they can rejoin the Eurozone, but until then they seriously need their own currency for any hope of recovery. The Euro is too strong for them and their hands are too tied. They do not really need the Euro either, and have always been seen as an outsider.

[-:Undertaker:-]

The only real option I can see working is that Greek pulls out of the Eurozone, reinstates their own currency (Drachma), devalue it heavily in the hopes of making it cheap to invest and import/export, and grow that way. Maybe in the future they can rejoin the Eurozone, but until then they seriously need their own currency for any hope of recovery. The Euro is too strong for them and their hands are too tied. They do not really need the Euro either, and have always been seen as an outsider.

The Euro is doomed to fail even for the other countries as with any monetary union (parts of England can even be an example) you have poorer areas and richer areas and obviously currency in say inner Liverpool and Glasgow is different to the English shires and Islington. The reason why the Sterling zone works though is that it has subsidies from the wealthier parts to the poorer parts, which helps offset any differences: and this is politically acceptable to the people of Great Britain as we're a nation, a people and thus we have a demos. We're in agreement to subsidise one another rather like a family unit which is what nationhood is.

For the Euro to work there will need to be huge fiscal transfers of a permanent kind from wealthier countries like Germany and the Netherlands to the likes of Greece and Spain. Of course, the problem is that as none of these countries have any shared culture/a demos it's politically not going to happen. It's doomed.

[FlyingJesus]

Would losing a weak and leeching country not make the Euro stronger overall

[-:Undertaker:-]

Would losing a weak and leeching country not make the Euro stronger overall

Not really, the entire project isn't an economic project it's a political one. And much like the broader European project, it runs on the premise that European integration is irreversible and ever close union constantly ongoing - once that principle is violated the the project will unravel. The danger in allowing Greece to go for the EU is that others will follow as should Greece recover then why would the likes of Spain, Portugal and Italy want to continue to submit themselves to economic sadomachism? Economically for example, the weaker countries leaving the Eurozone would hurt the richer countries as their exports would then be more expensive.

All of this was warned about when the Euro was concepted and the EEC/EU ignored the warnings. Any potential crisis was seen as another way to force integration.

[The Don]

Would losing a weak and leeching country not make the Euro stronger overall

of course it would, dunno what conspiracy crap dans talking about when it is basic economics.

[-:Undertaker:-]

of course it would, dunno what conspiracy crap dans talking about when it is basic economics.

Taking economic lessons from an avid supporter of the European project (which gave birth to the Euro) is funny.

If the weaker countries such as Greece, Portugal and Spain left the Euro then you still wouldn't have solved the underlying fundamental problem that monetary union requires economic union to work which in turn requires political union. In addition, the cost of exporting for the wealthier countries such as Germany, Austria and the Netherlands would rise - something Germany has made use of over the past decade which is an artificially low (thanks to Greece etc) currency rate.

[The Don]

Taking economic lessons from an avid supporter of the European project (which gave birth to the Euro) is funny.

If the weaker countries such as Greece, Portugal and Spain left the Euro then you still wouldn't have solved the underlying fundamental problem that monetary union requires economic union to work which in turn requires political union. In addition, the cost of exporting for the wealthier countries such as Germany, Austria and the Netherlands would rise - something Germany has made use of over the past decade which is an artificially low (thanks to Greece etc) currency rate.

Nice ad hominem response. If the weakest nation leaves the eurozone it will strengthen the currency which is what Tom said. Good grief, didn't you just study economics for three years?

[-:Undertaker:-]

Nice ad hominem response. If the weakest nation leaves the eurozone it will strengthen the currency which is what Tom said. Good grief, didn't you just study economics for three years?

And I just told you how the likes of Germany have benefitted from having an artifically weak currency.

A currency being 'strong' is harmful to exports, which means a 'strong' aka more expensively valued Euro would hit Germany and the Netherlands hard.

[The Don]

And I just told you how the likes of Germany have benefitted from having an artifically weak currency.

A currency being 'strong' is harmful to exports, which means a 'strong' aka more expensively valued Euro would hit Germany and the Netherlands hard.

So you do agree that Greece leaving would make the euro stronger overall, thank you.

[-:Undertaker:-]

So you do agree that Greece leaving would make the euro stronger overall, thank you.

I assume by Euro we are talking about the Eurozone economies, not the exchange rate of a currency which changes day to day. The Euro becoming 'stronger' against the US Dollar in the event of the weaker countries would hurt the Eurozone countries left themselves, as exports would become more expensive.

So yes, the Euro would probably rise in % against the US Dollar but the Eurozone economies themselves would then suffer and become weaker.

[The Don]

Ah yes, when tom talks about the strength of the euro currency i should have really assumed he was talking about Zimbabwean politics.

[-:Undertaker:-]

Ah yes, when tom talks about the strength of the euro currency i should have really assumed he was talking about Zimbabwean politics.

You are confusing strength of a currency (as in exchange rates which you are talking about) with strength of the currency area economically. Ever since currencies were unpegged from the Gold Standard, a currency exchange rate 'strength' doesn't always correlate to the size or strength of an economy.

Take the Pound Sterling to the US Dollar. America's economy is like x4 as big as Britain's, yet the Pound Sterling has the higher valued exchange rate. A Greek Eurozone exit would likely give the Euro a higher exchange rate value, but that would economically hurt exporting northern Euro countries like Germany/Austria.

So contrary to your wishes, a Greek exit wouldn't make the Euro stronger at all, and given it's political origin it will weaken the Euro.

[The Don]

You are confusing strength of a currency (as in exchange rates which you are talking about) with strength of the currency area economically. Ever since currencies were unpegged from the Gold Standard, a currency exchange rate 'strength' doesn't always correlate to the size or strength of an economy.

Take the Pound Sterling to the US Dollar. America's economy is like x4 as big as Britain's, yet the Pound Sterling has the higher valued exchange rate. A Greek Eurozone exit would likely give the Euro a higher exchange rate value, but that would economically hurt exporting northern Euro countries like Germany/Austria.

So contrary to your wishes, a Greek exit wouldn't make the Euro stronger at all, and given it's political origin it will weaken the Euro.

i'm not confusing anything, if someone says the euro and not the eurozone they're talking about the currency you fool.

[-:Undertaker:-]

i'm not confusing anything, if someone says the euro and not the eurozone they're talking about the currency you fool.

Are you stating to us then that you think Greece leaving the Eurozone will make survival of the Euro more likely or less likely?

[The Don]

Are you stating to us then that you think Greece leaving the Eurozone will make survival of the Euro more likely or less likely?

I'm saying that I think Greece leaving the Eurozone will strengthen the Euro currency. I don't know and haven't commented on the longterm survival of the Eurozone.

[-:Undertaker:-]

I'm saying that I think Greece leaving the Eurozone will strengthen the Euro currency. I don't know and haven't commented on the longterm survival of the Eurozone.

But what do you mean by strengthen? By the simple exchange rate numbers or the political and economic structure? I assume when Tom was asking about the strength of the Euro that he was referring to the structural strength and survival of the Euro as a currency rather than the irrelevant exchange rate.

I cannot see how anybody can argue that the Eurozone will become stronger by Greece leaving, given the political foundations and nature of the Eurozone.

Interestingly the former F&C Secretary William Hague has written an article in the Daily Telegraph basically saying what I have said throughout this thread. (http://www.telegraph.co.uk/news/worldnews/europe/greece/11721838/Greece-does-not-mark-the-end-of-the-euro-debacle-merely-the-beginning.html)

[GommeInc]

Technically you're both wrong and right :P

If the weaker nations left, the stronger ones will have problems trading with the weaker countries as the currency will increase the cost of exports and imports. However, without the weaker ones the value of the currency will increase as the stronger countries will be seen as a wiser investment (as they are strong for a reason). That said, the weaker countries will have a better hand as a valueless currency could potentially open them up to good investment deals depending on if they have an effective economic policy to protect investors and ensure that what they are investing in is protected - something Greece will have to prove if they were to leave the Eurozone.

In short, stronger countries can trade better with other stronger countries, while weaker countries can only really trade with their own kind or attempt to show they're worth investing in. Japan did something similar, but was a strong country that had too strong a currency but had the luxury of devaluing its own currency to increase investments and to hold off a stalled economy.You get the problems with trading with Africa, and to some extent China, as no one really knows what value their economy is.

Not forgetting that if Greece do leave, it all depends on what market certain businesses work in. Some really won't give a crap, some will. Same for businesses in Greece. Some will thrive outside of the Eurozone, while others will suffer. It's never great for all of them - currently the banking industry is suffering.